‘Balance Needed’ Over Unpaid Rent And Administrations

Game Legal Action Highlights Need For Clarity

18.02.2013

By Rob Dixon

News that landlords have launched legal action over unpaid rent related to the retailer Game’s administration has highlighted how there is a clear need for a balance to be struck in the area, according to property experts at Irwin Mitchell.

Property Week reports that PricewaterhouseCoopers is working with four landlords and has filed an application for directions to Companies Court in relation to the rent issue.

The decision of Game to go into administration on March 26th 2012 – 24 hours after a rent quarter day – meant the administrators technically did not have to pay rent for their first three months of occupation . This is as a result of a ruling made in the case Goldacre v Nortel Networks UK.

According to Danny Revitt, a property litigation expert at Irwin Mitchell, reports of the situation regarding Game’s unpaid rent have put a spotlight on how struggling companies and their administrators are making decisions with one eye on the impact of the Goldacre decision.

He explained: “While the Goldacre ruling appeared initially to be good news for landlords, the reality has proved to be much different.

“Notably, the tendency for administrators to be appointed within days of the traditional rent quarter day has nullified the effect of the decision in many cases. However, administrators would argue that the Goldacre ruling can also be bad news for them, in that if a rent payment day falls during a period of occupation following the start of the administration, they could have to pay a full 3 months’ rent even if they cease using the premises a few days after the rent payment day.”

“As has been identified, a ‘pay-as-you-trade’ system unaffected by the timing of the administration in relation to the rent payment date would seem to strike the correct balance between the interests of the landlords and the other creditors of the company in administration.

“It remains to be seen whether the court’s decision in this instance will lead to the creation of the system that is being sought.”

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